Turning to our financial highlights, our revenue is up 10% on the prior corresponding period. Our cash flow from operations is running at an impressive 100%. We have reduced our debt from AUD 114 million to AUD 102 million. We report a statutory net profit after tax loss, primarily driven by the write-off of software and other isolated events. We report an underlying net profit of AUD 1.7 million. Turning to the next slide. The highlights of our first half: we've had positive volume growth across our divisions, servicing over 5,300 customers. We've had strong performance in our manufacturing division, particularly with crop protection products. We have expanded capacity with additional manufacturing sites and increased fleet: trucks and trailers. We have completed two acquisitions: one, a large chemical storage facility in Ingleburn and Sydney, and the other, a specialised hazardous cargo operation.
We are making significant and meaningful progress, rolling out a group-wide ERP system, a software system that will tie all of our operations together and provide significant efficiencies and cost savings. We are upgrading our logistics management software to provide a better service to our customers and to make our logistics operations more efficient. We are rolling out software to uniform all of our payroll systems and our HR management. The majority of this work will be completed this calendar year. We have continued to consolidate sites to improve efficiency across our network. We have sold non-core properties, and we are enjoying high levels of occupation utilisation of our extensive site network at this time. DGL is now shifting its focus from acquiring companies to extracting profit and growth out of our extensive network of assets and licenses and our extensive customer base. Next slide, please.
We've had some challenges in the first half. When we move from an outdated chemical storage warehouse to a new, more efficient and compliant warehouse, we suffer double rent. We have suffered significant wage increases across our operations, and these events have impacted on our profitability. We are now focused on cost control line by line. We are focused on site consolidation, and we are focused on productivity at every level across the business to rectify these cost overruns. We have experienced significant price competition for scrap lead batteries, which go into our recycling operation. There have been a number of new competitors come to the market, and they are paying more for batteries now than the value of the lead contained in the batteries. We have reduced our operations to ensure that we have done everything possible to mitigate losses here.
Weather events and other unpredictable events in our mining sector have disrupted our sales to mines. To mitigate this, we're broadening our customer base, and we expect to see improvement here in the second half. We are making this significant investment in rolling out unified software across the group. This software will replace the multitude of expensive and clunky systems that we operate on now. We are investing significant funds in this rollout, and we expect most of this rollout to be completed this calendar year. We expect that these steps that we are taking will ensure that the second half of FY2025 is better than the first half, and FY2026 is better than FY2025. Next slide, please. DGL is a chemical management company operating from 85 sites across Australia and New Zealand, with over 900 staff and 400 trucks and trailers.
Obviously, we work in an industry where injury is possible. I am pleased to report that our injury rate has dropped. It is a point of pride in DGL that we run safe operations. Next slide, please. DGL is focused on becoming the leading provider of services to the chemical industries across Australia and New Zealand and further afield. Manufacturing, we focus on crop protection products, mining, automotive, water and waste treatment, and construction products. Warehousing, primarily focused on the safe storage of chemicals and the transport of chemicals, whether that be packaged or bulk. In our environmental division, we see significant growth opportunities here. Our packaged waste operations are performing strongly. The completion of our liquid waste treatment development in Wollongong, which is expected later this financial year and with results in 2026, will be a significant element for our ongoing growth. Next slide, please.
Over the last 25 years, and particularly since listing in 2021, DGL has built up an extensive network of sites across Australia and New Zealand. These sites are licensed and compliant to store and formulate and treat end-of-life chemicals. Next slide, please. Highlights: our manufacturing division enjoyed strong growth from our crop protection operations. We've expanded our customer base. We've expanded the range of products that we formulate. We've expanded the capacity for production. We're increasing the cross-utilization of our assets from one division to the next, and we're increasing the range of chemicals and services that we provide to our customers. The strategic acquisitions of Australian Petro Chemical Storage Pty Ltd in New South Wales provide us with 12,000 tons of additional chemical storage capacity.
In our automotive division, we're seeing increasing competition, which is impacting on our margins, but we are increasing our customer base here, and I believe that these measures will put us in a good position. New Zealand has been in a deep recession, and this has had an adverse impact on our New Zealand operations. New Zealand's economy is now growing, and we expect to see our economic performance in New Zealand improve. The outlook: we're expanding our manufacturing capacity in Queensland. We are consolidating sites and expanding into new sites where they're required. We are taking an aggressive approach to staff costs, reducing our headcount where we can, reducing our dependence on casual labor, and monitoring overtime. We're increasing the production of palletized snail bait, and we're increasing the volume of our automotive formulation division to mitigate some of the problems and challenges we've had with margin.
Next slide, please. Our logistics division is key to our overall operations. We have improved the efficiency and the return from our fleet. We're investing in new trucks and bigger trailers. We are enjoying strong customer demand. Our customers see our network of services as being very desirable. We're increasing the license capacity to carry chemicals through our existing network. The acquisitions of the two companies I've mentioned further expand our customer base and our licenses and our capacities. We've had some challenges. We have written off a logistics software system that we started rolling out soon after listing. We simply grew too big for that system, so we have gone back and we are investing in the underlying system and ensuring that it meets all of the requirements for our customer service and for internal efficiencies. We're relocating from existing warehouses to larger warehouses.
There are significant one-off costs in these relocations. We effectively have to pay double rent through the moving process, and obtaining the new licenses and approvals can take months. We have scaled down our New Zealand logistics operations. We had a large facility in Wellington that we have now sold. The demand for chemical storage in Wellington has greatly reduced over the last few years. Looking to the future, the enhanced logistics software that we're in the midst of rolling out will significantly improve the profitability and operations of our logistics division in the second half. We're enjoying strong customer demand for our chemical storage and logistics services. We are adding in new mines and mine transport services into our mining division. Once again, it's still a challenge to find good drivers for chemical trucks.
We have to obviously meet the going rate for these, and this has impacted on our staff and costs. We are, as I've said, enjoying strong demand from our national customers, our international customers, to work across all of DGL's assets. The next slide, please. Environmental division, I've talked about our battery business that has been running at a loss, and we've scaled it down to mitigate future losses. I expect that some of the competition will soon leave the market. They are running at substantial financial losses, so I see opportunity for DGL here, but we have positioned the business so that we are not compelled to buy lead and recycle lead and run at a loss. Our packaged waste operations are performing strongly, and we're looking at expanding this service from our current Victoria base into other states.
Our liquid waste treatment development in Wollongong, we have made significant and meaningful progress in obtaining the licenses necessary to operate. We have a license to discharge some 275,000 tons a year of treated liquid waste. This is a significant asset, and we are excited about its potential once it is commissioned. To the outlook, we will continue to invest in our environmental division, particularly into liquid waste and particularly into treating packaged waste. Next slide, please. This is the financial results section, and I'll hand it over to our CFO, Frank Izzo.
Thanks, Simon, and good morning, everyone. I'll start on S lide 16 of the presentation, which shows DGL's trend, financial performance from FY2023 to the half-year FY2025. Revenue has continued to trend upwards for the first half of FY2025, which reflects the strong customer demand we've experienced in the crop protection sector.
This strong performance was offset by low volume in our ULAB and mining businesses. The strong cropping season recovery underpinned the gross margin increase for the first half of FY25, along with an uplift from acquisitions that were not in the first half of last year. Underlying NPAT was impacted by increased operating expenses during the first half of FY25 compared to the first half of last year. This increase was mainly due to higher headcount as well as inflationary pressures. I'll touch more on our cost drivers in more detail as we get into the pack. Turning to Slide 17, which is DGL's income statement for the half compared to the first half of last year. As I touched on in the previous slide, our revenue has improved half on half along with our gross margins.
Our expenses increased 14% on the first half, increasing to AUD 77.5 million, primarily driven by higher headcount and occupancy costs. Our employee costs were AUD 7.6 million higher on the half, which reflects the continued investment in the shared services rollout in Parramatta, as well as the impact of acquired headcount. Inflationary pressures were also a contributing factor to high costs across people and property. Our underlying net profit after tax for the half was AUD 1.7 million, which was down AUD 5.7 million versus the same period last year. Our underlying net loss after tax for the first half was AUD 2.2 million, which is AUD 8.1 million down half on half. This result includes non-recurring items during the half, mainly relating to software write-offs and write-downs that Simon mentioned previously.
To address the cost pressures we faced during the half, we've taken action and initiated a more intense focus on our costs, with particular focus on site consolidations and efficiency improvements. Over to Slide 18, which shows our revenue growth by division over time. This slide summarizes the key themes that have impacted our three divisions during the first half of FY2025, with strong performance in manufacturing offset by underperformance in the environmental division, which continues to be impacted by an industry-wide increase in demand for used lead-acid batteries. Turning to Slide 19, which shows the bridge between our half on half underlying NPAT performance as well as gross margin performance by division. This slide demonstrates the strong earnings we've seen in manufacturing and logistics, which was offset by the underperformance we've experienced in the environmental division and our cost overruns.
We have now restructured the ULAB recycling business to optimise for reduced volumes, to manage costs better, and improve profitability. We've taken actions to reduce our costs and improve profitability across the business. Turning to Slide 20, here we show the half on half movement in our expenses by key category. Our people costs have gone up AUD 7.6 million, half on half, which is attributable to acquired headcount not in the first half of last year and the increased headcount associated with the shared services rollout in Parramatta. Our property costs increased AUD 2.8 million, half on half, mainly due to the expansion of our physical footprint as well as inflationary pressures on property outgoings across all of our sites. As mentioned earlier, we are intensifying our focus on costs to address these cost pressures and improve our profitability in the second half and beyond.
These initiatives include site consolidations, and we're doing further work to right-size our cost base. Turning to Slide 21, our balance sheet. On this slide, you'll note our balance sheet strength with significant net tangible assets of AUD 188 million that provide a solid platform for future growth. Our net working capital balance has slightly increased from the FY2024 year-end balance, primarily due to the increase in inventory balances resulting from a more normalised cropping season. The settlement of a non-core property in New Zealand drove the decrease in our assets held for sale, with the remaining balance being one of our chlor-alkali plants in progress located in Queensland. Property, plant and equipment of AUD 257 million has decreased 1.4% from the FY2024 year-end balance. Our investment in CapEx was offset by disposals of additional non-core properties located in New Zealand.
Our intangibles have increased AUD 5.2 million from 30 June 2024, reflecting goodwill on two acquisitions completed during the half, and this was offset by the software write-offs that Simon mentioned earlier. Our net debt at 31 December 2024 was AUD 102 million, which represents 1.96 times our underlying EBITDA. Turning to Slide 22, we provide further insight into our capital allocation and efficiency. Our net working capital balance has remained steady when compared to the first halves of prior years, and our net operating assets at the half were AUD 465 million. AUD 137 million of this relates to DGL's strategic land and building holdings, which have hard-to-acquire licenses that provide high barriers to entry. Finally, turning to Slide 23, I'd like to talk to our cash flow.
Our operating cash flow for the half was AUD 18.1 million, which was down from AUD 19.3 million in the first half of last year, and our operating cash flow conversion remained high at 100%. Investing cash flows for the half were AUD 2.2 million, which mainly relates to the disposal proceeds of AUD 18 million from non-core properties in New Zealand. Our financing cash outflows for the half were AUD 22 million, which relates to the repayment of term debt and lease repayments. With that, I'll hand back over to Simon.
Thank you very much, Frank. Looking at our outlook and our strategic focus, DGL is focused on becoming the leading provider of services to chemical industries across Australia and New Zealand and further afield. We will remain focused on our three main divisions, that is manufacturing and formulation, chemical logistics, and environmental services.
We see substantial opportunity to improve the utilisation of our extensive asset base, which will in turn drive earnings growth. We see pathways and opportunity to expand our product range and increase volumes and expand services to our growing customer base. We've enjoyed strong operating cash flow, which is available to support ongoing organic growth, with a bias also to reduce debt. We have made significant investments to improve productivity and to drive margin expansion. Management has taken steps to address some of the challenges we have faced. We have had significant cost increases in occupancy costs, headcount, and inflation. We see substantial inefficiencies in our business through the lack of integration of the multiple systems that the business currently operates on. These are being addressed through the rollout of a group-wide ERP system, which will replace a number of existing and somewhat clunky operating systems that we use today.
We are centralizing our administration and our shared services hub in Parramatta. This will in turn provide and create significant cost efficiencies across the group. The next slide, please. We're enjoying strong demand for our crop protection services. This will continue into the second half of FY2025. Our automotive division is seeing increased competition and some reduction in margin, but we are mitigating this by expanding volume and expanding our customer base. The raw materials commodities, the input prices are normalizing at lower levels, which will feed through to better results in the second half. We saw turbulent and volatile international freight rates in the first half, and we believe that these will normalize. Our transport and warehousing operations, servicing chemicals, is enjoying strong demand. The outlook for FY2025, soft labor market in New Zealand on the back of a recession, while the Australian labor market remains tight.
We will see increased revenue across the group from our recent acquisitions and a contribution from some of the organic growth projects that we have been investing in. We will have a stronger focus on commercial sales, leveraging our extensive network of licensed facilities and our logistics capabilities. The acquisition of two companies that I've mentioned have also brought a large number of new customers into the DGL network. We will look to further grow revenue by expanding the sales of our services to our broad customer base, cross-selling to our existing customers and the new customers. We expect to see savings and efficiencies achieved through the rollout of our group-wide ERP system. Management and the board are intensely focused on cost management line by line across the group, and we are focused on the full integration of all acquisitions we have made since listing in 2021. Next slide, please.
DGL is now established as a leading provider of services to the two chemical industries across Australia and New Zealand. We operate in a highly regulated environment. These regulations are getting tougher, which on one hand creates a headache, but on the other hand creates opportunity. There are fewer players in the business. By integrating the companies that we've bought since listing, we're able to provide our extensive customer base with a full service offering on one platform. We're increasing to diversify the industries we service, the products we offer, and the geographies we cover. We see significant earnings and organic growth opportunities by better leveraging the substantial portfolio of assets and capabilities that the group has built up over the last 25 years. We see substantial cost savings through the rollout of unified software across the group and other efficiency drives that we are carrying out at this time.
DGL has an experienced board and well-experienced senior managers who are well-positioned to execute on these efficiencies that I've outlined here. Let's go to questions.
There are a number of questions submitted, to try to get through as many as possible, where we've received multiple questions that are similar, I'll amalgamate them into one question, or I'll read out the broadest question, which will cover the others. Questions can be submitted by the Q&A function but can't be asked over audio. The first question is for you, Simon. In previous interviews and webinars, you've stated that you were comfortable with the level of debt DGL had and that the company was actively considering buybacks. Why has the company decided to pay down debt instead of undertaking buybacks, and what's the intention going forward in this regard?
Thank you for the question, Hannah.
We regularly discuss this matter in our board meetings. The board at this time has elected to pay down debt, but share buybacks remain an option to us at any time, should we elect to use proceeds from sales or earnings to buy back shares. It is something we monitor on an ongoing basis.
Is revenue increase a result of revenue from acquisitions or organic growth?
It is a split of both.
What is the plan with non-core property sales going forward, and how much money could that raise?
We are always looking to rationalize our property portfolio. We will always look to sell assets that we see as non-core, but at the same time, we will look to acquire assets that we believe are necessary for us to own to grow as a group.
I'm not willing to put a number on it at this time, but there are other properties that we are considering selling.
Was the Wellington facility sold at a profit?
It was sold at a profit to what we paid for it, but it was sold at a loss to its book value. I'd like to point out that of all the properties DGL has sold since listing, the net result is above book value.
There's been a AUD 7.6 million increase in employee costs versus the prior comparative period. How much of that relates to the shared services rollout in the head office in Parramatta versus within the actual operations of the business?
At a high level, we've spent AUD 1.75 million on an annualized basis into the shared services development in Parramatta. The balance is split between staff across the existing operations and the new acquisitions.
Is the plan going forward to reduce acquisitions and concentrate on integrating existing operations?
Absolutely. Sorry.
What other cost efficiencies are expected on this?
The first part of the question, we feel as a group that we have now acquired the necessary assets and licenses to create an integrated network to provide these services that are quite unique to the chemical industry in Australia and New Zealand. We do not see the need to acquire more companies now. Of course, if the right asset comes along at the right price and we see significant strategic value in it, we will still be looking at it closely. I am not willing to put a number on what profit we might derive from the efficiency drives that are currently being carried out, but I will say it is significant.
Is this the right time to be focusing on the ERP and head office optimisation rather than focusing on reducing costs?
Look, it's a really good question. As painful as it is, we need to invest in these group-wide systems and the efficiencies of having one shared services hub. We have to suffer the pain of that investment and development to extract full value out of the assets that we have acquired.
Is the ULAB business learning that DGL will avoid business verticals where there's no barriers to entry?
There are significant barriers to entry into the lead business. That said, that hasn't stopped competition and increasing, but it is a valid question.
It's one of the reasons we like chemical formulation because it really involves DGL standing before the customer and demonstrating to the customer that we have the quality controls, the qualifications to do their work properly, where notwithstanding the need to get a license, anyone can recycle lead. I want to answer the question carefully. Yes, DGL will be very careful about being in any business that has low barriers to entry.
Has this emphasized the focus of DGL on businesses with licenses and more barriers?
Yes. Once again, there are multiple licenses necessary to recycle lead. That has not stopped competition increasing, but it is a very valid and very interesting question that we love being on the right side of a regulated industry. I can tell you that gaining any license now to do anything to do with chemicals is immensely difficult.
Yes, to answer the question, we will be focusing on industries and operations that have high barriers to entry and future acquisitions and organic growth projects.
Given the comments about normalisation of prices and challenges with competition, do you believe the gross margin will stay over 40%, or will it lower to pre-COVID levels?
I'm very careful not to forecast future profits, but I want shareholders to understand that the management of DGL is utterly committed to reducing our operating costs, to streamlining our operations, which I believe will in turn maintain or grow our margins.
Did revenues decline towards the end of the December half? The AGM commentary anticipated a broadly in line result for H1.
Sorry, once more, please, Hannah.
Did revenues decline towards the end of the December half as the AGM commentary anticipated a broadly in line result for H1?
Frank Izzo, past that, I'll pass that question over to you.
Yeah, we did see a slight softening there, but broadly, we think that there's going to be a catch-up in H2. We're seeing predominantly all our activity right now is promising in the manufacturing division, driven by the cropping season recovery, as Simon's touched on. We're expecting it to recover somewhat through Q3.
In order to leverage existing customer base to cross-sell within DGL, there must be existing capacity within DGL for physical locations and equipment assets and people assets. With the people costs being so high, would more hiring be needed to accommodate the cross-sell? It's a bit of both.
The ERP system we're rolling out will allow us to have far quicker and better transparency into our businesses. On that side, it will lower costs and lower administration costs.
Of course, from time to time, we will need to employ more people. A good example is one truck needs one driver, so you can't reduce staffing and trucks. Certainly, the rollout of the ERP system, the improvement to our logistics software, the rollout of our uniform payroll systems will allow us to make substantial reduction in our administrative costs.
There was a comment earlier that DGL knew that privately owned competitors were running at a loss. Is this an assumption, and could it be possible that competitors are actually running at a profit? I believe this was in relation to the ULAB business.
Let me say a standard battery that you have in your car contains a certain amount of lead. That lead is a known quantity. The lead is traded on the London Metal Exchange and has a recognized international price.
That is a known factor. When someone buys a battery, pays more for the battery than the value of the lead in the battery, I think we can assume that they are running at a loss. I do not understand how you could make a profit buying a battery for more than the value of the lead.
Occupancy costs are up 46% on last year with less property. Can you explain this result?
Just once more, please, Hannah.
Occupancy costs are up 46% on last year with less property. Can you explain this result?
I don't know if we have less property, but as I've talked about, we are moving from small, inefficient, and sometimes dated sites to large, more efficient sites. Through that transition, we suffer significant one-off relocation costs, primarily because we are paying rent twice.
Why is that tax payable when there is no profit?
Leave that to Frank.
It's largely as a result of our—it's a difference between tax and accounting book values. We've taken advantage of accelerated depreciation for tax purposes, largely through that COVID period. There is a large disparity between our accounting and tax
In the annual report. The environmental segment had assets of AUD 278 million, but reported a negative EBIT for half one. Do you need to impair those assets?
I'll answer that, Frank. We work closely with our auditors, assessing the value of all our cash-generating units. If we ever felt the need to impair an asset, we would impair it.
How much will costs reduce when the shared services duplication is unwound, and what's the timing on when this will happen?
I'm not willing to put a dollar sign in front of it or a dollar quantum, but the savings are significant, and the majority of the integration and rollout of our shared services will be completed this calendar year. It is the main focus of our board and our senior management, making sure that we stay on budget and on program to complete these significant development projects.
Your remaining drawn debt across Facility A and B is due on December 26. Are you planning to reduce the debt prior to the date or extend?
As we're not buying businesses as fast as we used to, our need for additional debt has significantly reduced. We, in fact, do not need much banking headroom at this time.
There are no more questions. I think that will wrap it up, Simon.
Thank you all.